The Strategist

IPPR: UK economy needs immediate reforms

09/10/2018 - 15:56

The Commission for Economic Justice at the British Institute for Public Policy Research (IPPR) presented results of a two-year study of the state of the UK economy. They came out disappointing: the country's economy is not operating properly, it is not fair, is not contributing to the prosperity of citizens and, as a consequence, immediately needs fundamental structural reforms.

For nearly two years, the Commission for Economic Justice at IPPR has been studying all aspects of the British economy to assess its condition, identify its weaknesses and think through a new economic policy in view of the country's forthcoming withdrawal from the European Union. The weak point, according to the commission's members, was the entire economy of the UK, and to correct the situation the country needs reforms comparable in scale and rigidity to those that Margaret Thatcher carried out in the 1980s. The commission was created by IPPR in the fall of 2016, and consists of 22 people who are well-known experts in economics, management and advanced technology, as well as of university professors, business leaders, trade union leaders, and the spiritual leader of the Church of England, Archbishop Justin Welby of Canterbury.

The commission published its conclusions in a 338-page report, emphasizing that its opinions are independent of any political views, do not take sides on the issue of Brexit and do not search for perpetrators of the current economic situation.

The main conclusion of the commission is that the British economy does not work, it needs fundamental reforms. A strong economy is a fair economy, justice must be "rigidly programmed" in the very principles, changes are needed here and now, not in the distant future.

The main proposals of experts are described in ten points concerning the main directions of reforms.

First, they believe that a policy of "new industrialization" is necessary, and the government has to create industrial clusters around universities engaged in scientific research; the industrial strategy must be revised with setting clear goals and objectives for state support of industry, expansion of state investments in industry, etc.

To improve the situation in the labor market, experts recommend, among other things, to raise the minimum wage to the real subsistence minimum (£ 8.75 an hour outside of London), expand participation of trade unions in improving working conditions, oblige companies to disclose data on the wage gap, more flexible approach to drawing up working schedules, especially for women, as they raise children and care for elderly relatives.

In order for the economy to develop effectively, it needs a successful private sector, and it has to focus on long-term success, not on achieving immediate benefits for shareholders of companies. One of the proposals is inclusion of at least two representatives from the work collective in governing board of companies, control of amount of payments to top management of companies, simplification of the principle of top managers’ bonuses and linking them to such indicators as innovations and performance, not the value of shares.

In addition, the commission sees the need to eliminate monopoly and regulation of the Internet giants and digital platforms; building automation simultaneously with expanding investment in retraining and retraining of labor resources; strengthening the financial system; solving the problem of property inequality, in particular, by creating a welfare fund for citizens, from which everyone will be able to receive annual dividends; simplification of the taxation system and optimization of taxes; achieving environmental sustainability; creation of a new economic constitution, taking into account changes in the economy over the past 40 years, and so on.

Commenting on the publication of the report, the chairman of the commission on economic justice and one of IPPR leaders noted that there is every reason to believe in the possibility of implementing such grandiose reforms and their success, as the British economy experienced such a scale of transformations more than once, for example, in the 1940s the years of the last century, when the country was recovering from the war, and also in the 80's under Margaret Thatcher. "We are able to bridge the gap between what our country is now and what we want to see it," he said.